The growth of the Internet has created a new way to buy, sell, trade, and barter foods and services worldwide. This new form of buying, selling, trading, and bartering may commonly be referred to as electronic commerce or e-commerce. Electronic banking has also created new ways to conduct financial transactions both regionally and worldwide. The process of conducting these types of transactions can be called an electronic commerce transaction or e-commerce transaction.
Credit cards have been in existence for a relatively long time. Retail stores initially issued these cards for use in the store or chain of stores. The store extends credit to a customer to purchase items and requires payment at the end of a billing period. Credit card processing networks exist, allowing consumers to use one credit card to shop at a variety of merchants. With this type of card, a card issuer, such as a bank, extends credit to a consumer to purchase products or services. When a consumer makes a purchase from an approved merchant, the card number and amount of the purchase, along with other relevant information, are transmitted via the processing network to a processing center which verifies that the card has not been reported lost or stolen and that the card's credit limit has not been exceeded. In some cases, the consumer's signature is also verified. The consumer is required to repay the bank for the purchases, generally on a monthly basis. Typically, if the bank is not fully repaid by the due date, the consumer incurs a finance charge. The card issuer may also charge an annual fee.
Debit cards are also currently in use. They are typically linked to the cardholder's existing deposit account at a bank. There are generally two types of debit cards: “on-line” and “off-line.” When a consumer makes a purchase using an on-line debit card, the consumer inputs a personal identification number (“PIN”) to a terminal that is connected to a central processing center over a network. The center verifies the card number and PIN during the transaction, and the linked deposit account is immediately debited the amount of the purchase. When a purchase is made using an off-line debit card, and there is no connection to a central processing center, the customer's signature is typically used to verify the identity of the cardholder in much the same way as is done with credit cards. The information is later sent to a central processing center or directly to the relevant bank. A PIN may also be used in conjunction with off-line debit cards.
Another type of consumer card is a prepaid card. A consumer purchases the card for a particular amount of money. The cash value of the card is typically stored in either of two ways. The value can be indicated by data stored in the memory of the card. Alternatively, in a card having a magnetic stripe or in some cards having an integrated circuit (“IC”) on them, value is indicated by data stored in a central host, which can be accessed using information stored on a magnetic stripe on the back of the card. Verification of the identity of the purchaser of the card is typically not required. With either an IC-type card or a magnetic stripe-type prepaid card, value is preloaded before a purchase is made. In addition, individual users of prepaid cards typically have no demand deposit account (“DDA”) relationship with the financial institution that holds the prepaid card funds. When a consumer uses a prepaid card to make a purchase, the data indicating the value currently associated with the card is decreased by the amount of the purchase and any fees, if applicable. If the prepaid cards are not linked to a central host, the value indicated on the card will typically be unrecoverable if the card is lost.
Prepaid cards have been issued in association with particular merchants. These cards can be used only when purchasing goods or services from that particular merchant, similar to the limited usage associated with store credit cards. The cards are typically available in preset denominations (e.g., $10, $50, $100) and may or may not be activated before they are shipped to the store. If pre-activated and stolen, a card could be used immediately to make purchases before the theft was discovered. At any time after a customer purchases this type of card from a particular merchant, the card can be used to buy goods or services from that merchant or other merchants honoring the same card. The purchase process typically operates as follows. The cardholder presents the card for payment. The store attendant verifies the card number through a terminal which communicates with a store network and causes a debit of the amount of the purchase to the account associated with the card. When the card's value is depleted, the card is typically discarded.
On many occasions, consumers, bank customers, credit card holders and others find it desirable to arrange for another person, perhaps a relative, to have access to a specified sum of money. For example, a parent might want to arrange for a child to have access to money when the child is taking a vacation or going away for college. One may also find it desirable to mail a gift to another person who is geographically distant. According to a published study, in 2001, immigrants in the United States sent $23 billion abroad to Latin America and the Caribbean. In these and other cases, it is often undesirable to give away or send cash. If lost or stolen, cash is practically unrecoverable. Bank fund transfers, or other familiar financial wiring processes, can be costly and inconvenient.
The flow of remittances to the regions poorest countries are most often sent by persons who are un-banked immigrants. Millions of dollars of monthly money orders, averaging $200 each, generate more than $9.3 billion a year for Mexico. It is estimated that the annual cash flow to Latin America could be increased by $4 billion or more by reducing the transaction cost associated with sending money abroad.
While e-commerce continues to grow in popularity among banking consumers, the un-banked community has yet to realize the benefits of convenience and flexibility that e-commerce provides. Approximately thirty million people who reside in the United States do not have a bank account. This group of un-banked people includes people who have bad credit, a prior bankruptcy, low income and those who simply decide not to participate in the mainstream financial markets.
What has been needed is a financial system providing the benefits of e-commerce use to those people that would otherwise not have access to the fast evolving e-commerce financial systems of today. The present invention meets these and other needs.